Document:

MD - Filed by Filing Services Canada Inc. (403) 717-3898

 
  

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

Issue Date: __________, 2012                                                                                                                    $_________________

CONVERTIBLE PROMISSORY NOTE

DUE FEBRUARY 19, 2013

THIS CONVERTIBLE PROMISSORY NOTE is one of a series of duly authorized and validly issued Convertible Promissory Notes of The Green Polkadot Box, Inc.., a Utah corporation, (the “Company”), having its principal place of business at 629 E. Quality Dr., Suite 103, American Fork, UT 84003, designated as its Convertible Promissory Note due February 19, 2013 (this note, the “Note” and, collectively with the other notes issued in the Offering, the “Notes”).

FOR VALUE RECEIVED, the Company promises to pay to ________________________ or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $_______________ on ___________, 2013 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof.  This Note is subject to the following additional provisions:

Section 1.                      Definitions.  For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein shall have the meanings set forth herein and (b) the following terms shall have the following meanings:

 
   

   

   

   

   

  

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“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within sixty days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within sixty calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“Common Stock” shall mean the Company’s common stock, no par value.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Issue Date” means the date of the first issuance of the Note set forth on the cover page of this Note, regardless of any transfers of the Note and regardless of the number of instruments which may be issued to evidence such Note.

“Offering” means that certain offering of the Company of up to $500,000 in aggregate principal of Notes.

     “Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

“PIPE Offering” means the first sale of the Public Company’s equity securities after the closing date of a Reverse Merger Transaction in a private placement of the Public Company’s equity securities in conjunction with a Reverse Merger Transaction.

“PIPE Securities” means the equity securities issued and sold by the Public Company in a PIPE Offering.

“Public Company” means an entity that is required, or whose parent is a corporation that is required, to file reports pursuant to Section 13 or 15(d) under the Exchange Act.

 

  

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“Reverse Merger Transaction” means a transaction in which the Company directly or indirectly (a) merges or consolidates with, or in one or a series of related transactions, sells all or substantially all of its assets to, a Public Company, that is required to be accounted for by the Public Company as a “reverse acquisition” under U.S. generally accepted accounting principles; or (b) is sold or otherwise acquired by a Public Company in a share exchange or other transaction or business combination other than a merger or consolidation.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

Section 2.                      Interest.

a) Payment of Interest. Interest on the aggregate unconverted and then outstanding principal amount of this Note shall, subject to the following paragraph, accrue and be payable at 12% per annum. Except as otherwise set forth herein, interest shall be payable on the Maturity Date.

b) Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, and other amounts which may become due hereunder, has been made. Interest shall cease to accrue with respect to any principal amount converted.  Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “Note Register”).

Section 3.                      Registration of Transfers and Exchanges.

 

 

a) Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same.  No service charge will be payable for such registration of transfer or exchange.

 

 

b) Investment Representations. This Note has been issued subject to certain investment representations of the original Holder set forth herein and may be transferred or exchanged only in compliance with the Subscription Agreement and applicable federal and state securities laws and regulations.

c) Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

Section 4.                      Mandatory Exchange.

 

  

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a)           Upon the first closing of a PIPE Offering, all of the outstanding principal balance of this Note shall be automatically exchanged into that number of PIPE Securities equal to the quotient obtained by dividing: (i) the outstanding principal balance of this Note, by (ii) a price per PIPE Security equal to 90% of the price at which the PIPE Securities are sold in the PIPE Offering (the “Exchange Price”).  Such exchange shall be deemed to have been effected on the first closing date of the PIPE Offering, with the same rights and preferences, if any, as all other equity securities sold in the PIPE Offering, except that any warrants issued in the PIPE Offering shall be exercisable at a price equal to 90% of the Exchange Price.  The Holder shall be entitled and required to enter into any agreements (including without limitation any subscription agreement and lockup agreement and whether conferring registration rights, rights of first refusal, or other rights or obligations) that the purchasers in a PIPE Offering enter into in connection with the PIPE Offering. In the case of such exchange, all accrued interest on the exchanged portion of this Note shall be paid in cash on the first closing date of the PIPE Offering.

b)           No fractional PIPE Securities shall be issued upon the exchange of this Note.  As to any fraction of a PIPE Security which the Holder would otherwise be entitled to exchange, the Company round up to the next whole PIPE Security.

c)           On the exchange of this Note and the issuance of PIPE Securities to the Holder, this Note shall be considered fully discharged and paid-in-full, whether or not the Holder surrenders this Note to the Company or the Public Company for cancellation.

 

Section 5.                      Events of Default.

a)       
  “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

i.           a default in the payment of the principal amount of this Note or any accrued interest on this Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default is not cured within five Business Days following such due date;

ii.           the Company shall fail to observe or perform any other covenant or agreement contained in this Note which failure is not cured, if possible to cure, within twenty Business Days after notice of such failure sent by the Holder or by any other Holder to the Company;

iii.           the Company shall be subject to a Bankruptcy Event; or

 

  

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b)           Remedies Upon Event of Default. Upon the occurrence  of an Event of Default  referred to in Section 5(a)(i) and (ii), the  Holder, by ten Business Days’ notice in writing  given to the Company (during which time, the Company may cure such Event of Default),  may declare the entire  principal  amount then  outstanding of, and accrued interest on, this Note to be due and payable  immediately,  and upon any such declaration the same shall become and be due and payable immediately, without presentation, demand,  protest,  or other  formalities of any kind, all of which are expressly waived by the Borrower. Upon the  occurrence of an Event of Default referred to in Section 9(a)(iii), the principal  amount then  outstanding of, and the accrued interest on, this Note shall  automatically  become  immediately due and payable without  presentment, demand,  protest, or other formalities of any kind, all of which are hereby  expressly waived by the Borrower.

Section 6.                      Miscellaneous.

 
  a) 
  Notices.  Any and all notices or other communications or deliveries to be provided by the Holder hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 6(a).  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of the Holder appearing on the books of the Company, or if no such facsimile number or address appears on the books of the Company, at the principal place of business of such Holder, as set forth in the Subscription Agreement.  Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on any date, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day, (iii) the second Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

b) Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed.  This Note is a direct debt obligation of the Company.  This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.

 

  
  c) Lost or Mutilated Note.  If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.

 

  

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d) Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of this Note (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby.

e) Waiver and Amendments.  Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note.  The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion.  Any waiver by the Company or the Holder must be in writing. This Note may be modified or amended or the provisions hereof waived with the written consent of the Company and Holders of a majority in principal amount of the then outstanding Notes.

f) Severability.  If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.  If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

 

  

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g) Next Business Day.  Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

h) Headings.  The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

   

   

   

   

[Intentionally Blank]

 
 

  

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.

	 	THE GREEN POLKADOT BOX, INC.	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	Name:	 
	 	 	Title:	 
	 	 
Facsimile No. for delivery of Notices: __________

	 

 
   

   

   

   

  

8THIS SUBORDINATED NOTE AND ANY SHARES
OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SUBORDINATED NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THIS SUBORDINATED NOTE OR SUCH SHARES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.

 

CNS RESPONSE, INC.

SUBORDINATED CONVERTIBLE PROMISSORY NOTE

 

	$90,000	Date of Issuance:  February 29, 2012
	 	Aliso

Viejo, California

 

FOR VALUE RECEIVED, CNS
Response, Inc., a Delaware corporation (the “Company”), promises to pay to Zanett Opportunity Fund, LTD
(“Holder”), or its registered assigns, in lawful money of the United States of America, the principal sum of
Ninety Thousand Dollars ($90,000), together with a single payment of accrued interest
calculated based on the actual days outstanding and a 360 day year at a rate of nine percent (9%). Such interest shall be paid
pursuant to Section 2 below (“Interest Payment”). All unpaid principal, together with the accrued interest and
other amounts payable under this Subordinated Convertible Promissory Note (this “Subordinated Note”)
shall be due and payable, unless converted in accordance with Section 6 hereof, on the earliest of (i) the maturity date of
twelve months from the date of issuance, (ii) prepayment of this Subordinated Note pursuant to Section 3 below, or
(iii) when, upon or after the occurrence of an Event of Default (as defined below), such amounts are made due and payable
in accordance with the terms hereof. Sections 6(a)(ii) and 6(c)(iii) and the proviso in the definition of “Conversion Price”
in Section 6(b) of this Subordinated Note may not be amended, waived or modified without the written consent of the Company and
the Holder. This Subordinated Note is subordinated in all respects to the Company’s obligations under:

 

		(i)	the secured convertible promissory notes (the “Senior
Notes”) issued pursuant to the Note and Warrant Purchase Agreement, dated as of October 1, 2010, by and between the
Company and the Investors listed on Schedule A thereto, and the related guaranties issued in favor of certain holders of such
notes by the guarantors thereof, and amended by an Amendment and Conversion Agreement, dated as of September 30, 2011, by and
between the Company and the Investors signatory thereto.

 

		(ii)	the subordinated secured convertible promissory notes
(the “January Notes”) issued pursuant to the Note and Warrant Purchase Agreement, dated as of January 20, 2011,
by and between the Company and the Investors listed on Schedule A thereto, and amended by an Amendment and Conversion Agreement,
dated as of September 30, 2011, by and between the Company and the Investors signatory thereto.

		(iii)	the subordinated secured convertible promissory notes
(the “$2M Bridge Notes”) issued pursuant to the Amended and Restated Note and Warrant Purchase Agreement, dated
as of October 18, 2011, by and between the Company and the Investors listed on Schedule A thereto.

 

    	 

    	 

    
 

 

The following is a statement
of the rights of Holder and the conditions to which this Subordinated Note is subject, and to which the Company and Holder agree:

 

1.     
Definitions. As used in this Subordinated Note, the following capitalized terms have the following meanings:

 

(a)               
“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The
City of New York are authorized or required by law to remain closed.

 

(b)              
“Closing Bid Price” and “Closing Sale Price” mean, for any security as of any date,
the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by
Bloomberg Financial Markets, or, if the Principal Market begins to operate on an extended hours basis and does not designate the
closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of
such security prior to 4:00 p.m., New York Time, as reported by Bloomberg Financial Markets, or if the foregoing do not apply,
the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg Financial Markets, or, if no closing bid price or last trade price, respectively,
is reported for such security by Bloomberg Financial Markets, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotations
Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any
of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall
be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately adjusted
for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

 

(c)               
“Company” includes the corporation initially executing this Subordinated Note and any Person which shall
succeed to or assume the obligations of the Company under this Subordinated Note.

 

(d)              
“Convertible Securities” means any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for Common Stock.

 

(e)               
“Holder” shall mean the Person specified in the introductory paragraph of this Subordinated Note or any
other Person who is the registered holder of this Subordinated Note.

 

(f)               
“Options” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible
Securities.

 

(g)               “Outstanding Debt” shall mean, as of a particular time, the sum of (i) the then outstanding principal
amount of this Subordinated Note and (ii) the amount of interest due pursuant to the Interest Payment.

 

(h)              
“Person” shall mean and include an individual, a partnership, a corporation (including a business trust),
a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental
authority.

 

(i)                
“Principal Market” means the OTC Bulletin Board or principal stock
exchange or trading market for the Common Stock, if any.

 

(j)                
“Securities Act” shall mean the Securities Act of 1933, as amended.

 

(k)              
 “Subsidiary” means with respect to any Person, any corporation, association or other business entity
of which more than 50% of the total voting power of equity entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees or other governing body thereof is at the time owned or controlled by such Person
(regardless of whether such equity is owned directly or through one or more other Subsidiaries of such Person or a combination
thereof).

 

    	-2-

    	 

    
 

(l)                
“Trading Day” means any day on which the Common Stock is traded on the Principal Market; provided that
“Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market
for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange
or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market,
then during the hour ending at 4:00 p.m., New York Time).

 

(m)            
“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 “Offering Price”), with such
offering to yield gross proceeds to the Company of at least $10 million.

 

2.     
Interest Payment. Subject to Section 3, the Interest Payment shall be payable at the same time the principal
amount of the Subordinated Note is repaid as described in the first paragraph hereof.

 

3.     
Prepayment. This Subordinated Note may be prepaid, in whole or part, at any time by the Company. All prepayment
amounts shall first be applied to any accrued interest with the remainder applied towards the outstanding principal (“Full
Prepayment” or “Partial Prepayment”). Holder agrees to deliver the original of this Subordinated Note
(or a notice to the effect that the original Subordinated Note has been lost, stolen or destroyed along with an indemnity with
respect thereto in a form satisfactory to the Company) at the closing of the Full Prepayment for cancellation or Partial Prepayment
for the appropriate principal adjustment; provided, however, that upon Full Prepayment of the amounts set forth above with
respect to the Outstanding Debt, 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 Note is delivered for cancellation as set
forth in the preceding sentence.

 

4.     
Notice of Defaults. The Company shall furnish to Holder written notice of the occurrence of any Event of Default
hereunder promptly following the occurrence thereof.

 

5.     
Events of Default.

 

(a)   
The occurrence of any of the following shall constitute an “Event of Default”:

 

                                                                            (i)
           Failure of the Company to pay the principal or the
Interest Payment on this Subordinated Note when due.

 

                                                                         
 (ii)            Failure
of the Company to perform or observe any covenant or agreement as required by this Subordinated Note or the Agreement and
continuation of such failure for a period of ten (10) days following written notice from Holder.

 

                                                                        
  (iii)           
The Company commences a voluntary bankruptcy filing.

 

                                                                          
(iv)          
A court of competent jurisdiction enters an order of decree under any bankruptcy law that is not vacated, set aside or reversed
within sixty (60) days.

 

                                                                          
 (v)           Any
representation or warranty of the Company made in this Subordinated Note or the Agreement is proven not to have been true and
correct in any material respect as of the date of this Subordinated Note.

 

    	-3-

    	 

    
 

(b)  
If an Event of Default occurs and is continuing, Holder may exercise any or all of the following rights and remedies:

 

                                                                            (i)
           Declare the Subordinated Note and the Interest
Payment be immediately due and payable, and upon such declaration, the Subordinated Note and the Interest Payment shall
immediately be due and payable, without presentment, demand, protest or any notice of any kind, all of which are expressly
waived.

 

                                                                          
(ii)           
Exercise any and all other rights and remedies available to Holder and otherwise available to creditors at law and in equity.

 

6.     
Conversion. The Subordinated Notes shall be convertible into shares of the Company’s common stock,
par value $0.001 per share (the “Common Stock”), on the terms and conditions set forth in this Section 6.

 

(a) Conversion
Right.

 

(i)At any
time or times on or after the date hereof, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion
Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 6(c), 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.

 

(ii)If the
Holder chooses to convert the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares
of Common Stock in accordance with Section 6(c)(iii) hereof, then, at the time specified in Section 6(c)(iii), the Conversion Amount
shall be converted into fully paid and nonassessable shares of Common Stock 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.

 

(b) Conversion
Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 6(a)
(the “Conversion Rate”) shall be determined by dividing the Conversion Amount by the Conversion Price.

 

“Conversion
Amount” means the sum of (A) the portion of the principal to be converted, redeemed or otherwise with respect to which
this determination is being made and (B) accrued and unpaid interest with respect to such principal.

 

    	-4-

    	 

    
 

“Conversion
Price” means, as of any Conversion Date (as defined below) or other date of determination, $0.10, subject to adjustment
as provided herein; provided that, in the case of any conversion pursuant to Section 6(c)(iii) hereof, “Conversion
Price” shall mean the lesser of $0.10 or the Offering Price.

 

(c) Mechanics
of Conversion.

 

(i)Optional
Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion Date”),
the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior to 4:00 p.m., New York Time, on such
date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”)
to the Company and (B) if required by Section 6(c)(ii), cause the Subordinated Note to be delivered to the Company as soon as practicable
on or following such date. On or before 4:00 p.m., New York Time, on the first (1st) Business Day following the date
of receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice
to the Holder (at the facsimile number provided in the Conversion Notice) and the Company’s transfer agent, if any (the “Transfer
Agent”). On or before 4:00 p.m., New York Time, on the third (3rd) Business Day following the date of receipt
of a Conversion Notice (the “Share Delivery Date”), the Company shall issue and deliver to the address
as specified in the Conversion Notice, 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 Subordinated Note is physically surrendered for conversion as required
by Section 6(c)(ii) and the outstanding principal of the Subordinated Note is greater than the principal portion of the Conversion
Amount being converted, then the Company shall as soon as practicable and in no event later than three (3) Business Days after
receipt of the Subordinated Note and at its own expense, issue and deliver to the Holder a new Subordinated Note representing the
outstanding principal not converted. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion
of the Subordinated Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the
Conversion Date.

 

(ii)Book-Entry.
Subject to Section 6(c)(iii) hereof, upon conversion of any portion of the Subordinated Note in accordance with the terms hereof,
the Holder shall not be required to physically surrender the Subordinated Note to the Company unless (A) the full Conversion Amount
represented by the Subordinated Note is being converted or (B) the Holder has provided the Company with prior written notice
(which notice may be included in a Conversion Notice) requesting physical surrender and reissue of the Subordinated Note. The Holder
and the Company shall maintain records showing the principal and interest converted and the dates of such conversions or shall
use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of the Subordinated
Note upon conversion.

 

(iii)Conversion
or Redemption at Option of Holder. Notwithstanding Sections 6(c)(i) and 6(c)(ii) hereof, if and when the Qualified Offering
is consummated, the Conversion Amount shall be either (I) converted into shares of Common Stock concurrently with the consummation
of the Qualified Offering or (II) redeemed for cash, with the choice between conversion and redemption being at the sole option
of the Holder. The date on which the Qualified Offering is consummated is also referred to herein as the “Closing Date.”
If the Holder has chosen to convert the Conversion Amount, then, on or before 4:00 p.m., New York Time, on the tenth (10th) Business
Day following such Closing Date (the “Share Delivery Date”), the Company shall (i) issue and deliver to the
address as specified in the executed Conversion Notice (a form of which is attached hereto as Exhibit I), 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 and (ii),
if the Subordinated Note was converted only in part, make payment to the Holder in U.S. dollars for the unconverted principal amount
and accrued and unpaid interest thereon, if any. If the Holder has chosen to redeem the Conversion Amount for cash, then, on or
before 4:00 p.m., New York Time, on the Share Delivery Date, the Company shall make payment to the Holder in U.S. dollars for the
Conversion Amount. 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 Note is delivered for cancellation. The person or persons entitled to receive
the shares of Common Stock issuable upon a conversion of this Subordinated Note shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on the Closing Date.

 

    	-5-

    	 

    
 

7.     
Rights upon Issuance of Other Securities

 

(a) Record Date.
If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other
distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting
of such right of subscription or purchase, as the case may be.

 

(b) Adjustment
of Conversion Price upon Subdivision or Combination of Common Stock; Stock Dividends. If the Company at any time, or from time
to time, subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will
be proportionately reduced. If the Company at any time, or from time to time, combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price
in effect immediately prior to such combination will be proportionately increased. Any adjustment under this Section 7(b) shall
become effective at the close of business on the date the subdivision or combination becomes effective or, in the case of a stock
dividend or distribution, the date of such event.

 

(c)(i)Adjustment
of Conversion Price upon Cash Dividends and Distributions. If the Company at any time, or from time to time, pays a dividend
or makes a distribution in cash to the record holders of any class of Common Stock, then immediately after the close of business
on the day that the Common Stock trades ex-distribution, the Conversion Price then in effect shall be reduced to an amount equal
to the product of (i) the Conversion Price in effect immediately prior to such dividend or distribution and (ii) the quotient determined
by dividing (A) the Closing Sale Price of the Common Stock on the day that the Common Stock trades ex-distribution by (B) the sum
of (1) the Closing Sale Price of the Common Stock on the day that the Common Stock trades ex-distribution plus (2) the amount per
share of such dividend or distribution. The Company shall not be required to give effect to any adjustment in the Conversion Price
pursuant to this Section 7(c) unless and until the net effect of one or more adjustments (each of which shall be carried forward
until counted toward an adjustment), determined in accordance with this Section 7(c), shall have resulted in a change of the Conversion
Price by at least 1%, and when the cumulative net effect of more than one adjustment so determined shall be to change the Conversion
Price by at least 1%, such change in the Conversion Price shall thereon be given effect.

 

(ii)Adjustment
of Conversion Price upon Distributions of Capital Stock, Indebtedness or Other Non-Cash Assets. If the Company at any time,
or from time to time, distributes any shares of capital stock of the Company (other than Common Stock), evidences of indebtedness
or other non-cash assets (including securities of any person other than the Company but excluding (1) dividends or distributions
paid exclusively in cash or (2) dividends or distributions referred to in Section 7(b)) to the record holders of any class of
Common Stock, then the Conversion Price then in effect shall be reduced to an amount equal to the product of (A) the Conversion
Price then in effect and (B) a fraction of which the numerator shall be the Closing Sale Price share of the Common Stock on the
record date fixed for determination of stockholders entitled to receive such distribution less the fair market value on such record
date (as determined by the Company’s board of directors) of the portion of the capital stock, evidences of indebtedness
or other non-cash assets so distributed applicable to one share of Common Stock (determined on the basis of the number of shares
of Common Stock outstanding on the record date) and of which the denominator shall be the Closing Sale Price per share of the
Common Stock on such record date. Notwithstanding the foregoing, if the securities distributed by the Company to the record holders
of any class of Common Stock consist of capital stock of, or similar equity interests in, a Subsidiary or other business unit,
the Conversion Price shall be decreased so that the same shall be equal to the rate determined by multiplying the Conversion Price
in effect on the record date with respect to such distribution by a fraction the numerator of which shall be the average Closing
Sale Price of one share of Common Stock over the Spinoff Valuation Period (as defined below) and of which the denominator shall
be the sum of (x) the average Closing Sale Price of one share of Common Stock over the ten consecutive Trading Day period (the
“Spinoff Valuation Period”) commencing on and including the fifth Trading Day after the date on which “ex-dividend
trading” commences on the Common Stock on the Principal Market or any national or regional exchange or market on which the
Common Stock is then listed or quoted and (y) the average Closing Sale Price over the Spinoff Valuation Period of the portion
of the securities so distributed applicable to one share of Common Stock, such adjustment to become effective immediately prior
to the opening of business on the fifteenth Trading Day after the date on which “ex-dividend trading” commences.

 

    	-6-

    	 

    
 

(d) Ratchet.
In the event the Company shall issue Common Stock, or securities convertible, exchangeable or exercisable into Common Stock (excluding
in each case shares issued (i) in any of the transactions described in Subsections (a), (b) and (c) above, (ii) upon exercise of
options granted to the Company’s employees, directors, consultants or officers under a plan or plans or individual compensation
arrangements adopted by the Company’s board of directors, if such shares would otherwise be included in this Subsection (d),
(iii) upon conversion of shares or exercise of options and warrants outstanding as of the date hereof, or (iv) to shareholders
of any Company which merges into the Company in proportion to their stock holdings of such Company immediately prior to such merger,
upon such merger), for consideration per share, exercise price per share, conversion price per share or exchange price per share
(as the case may be)(“Offering Price”) less than the then applicable Conversion Price, the Conversion Price
shall be adjusted immediately thereafter so that it shall equal such Offering Price. Such adjustment shall be made successively
whenever any such issuance is made.

 

(e) Other Events;
Other Dividends and Distributions. If any event occurs of the type contemplated by the provisions of this Section 7
but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom
stock rights or other rights with equity features), then the Company’s board of directors shall make in good faith an adjustment
in the Conversion Price so as to protect the rights of the Holder under the Subordinated Note; provided that no such adjustment
will increase the Conversion Price as otherwise determined pursuant to this Section 7.

 

(f) Notice of Adjustment.
Whenever the Conversion Price is adjusted pursuant to this Section 7, the Company shall promptly mail notice of such adjustment
to each Holder, which notice shall set forth the Conversion Price after adjustment, the date on which such adjustment became effective
and a brief statement of the facts resulting in such adjustment.

 

    	-7-

    	 

    
 

8.     
Successors and Assigns. Subject to the restrictions on transfer described in Sections 10 and 12 below, the
rights and obligations of the Company and Holder shall be binding upon and benefit the successors, assigns, heirs, administrators
and transferees of the parties.

 

9.     
Waiver and Amendment. Sections 6(a)(ii) and 6(c)(iii) herein (Conversion or Redemption at Option of Holder)
and the proviso in the definition of “Conversion Price” in Section 6(b) herein may not be amended, waived or modified
without the written consent of the Company and the Holder, and any such amendment, waiver or modification shall be binding upon
the Company and the Holder, but shall not affect any other Subordinated Note or holder thereof. Any provision of this Subordinated
Note other than Sections 6(a)(ii), 6(c)(iii) and the proviso in the definition of “Conversion Price” in Section 6(b)
may be amended, waived or modified upon the written consent of the Company and the Majority Holders, and any such amendment, waiver
or modification shall be binding upon the Company and each holder of Subordinated Notes, it being understood and agreed
that such written consent will affect all Subordinated Notes and be binding on all holders thereof regardless of whether any particular
holder executed such consent.

 

10. 
Transfer of this Subordinated Note. With respect to any offer, sale or other disposition of this Subordinated
Note, Holder will give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written
opinion of Holder’s counsel, or other evidence if reasonably satisfactory to the Company, to the effect that such offer,
sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect,
as applicable). Upon receiving such written notice and reasonably satisfactory opinion, if so requested, or other evidence, the
Company, as promptly as practicable, shall notify Holder that Holder may sell or otherwise dispose of this Subordinated Note, all
in accordance with the terms of the notice delivered to the Company. This Subordinated Note thus transferred shall bear a legend
as to the applicable restrictions on transferability in order to ensure compliance with the Act, unless in the opinion of counsel
for the Company such legend is not required in order to ensure compliance with the Securities Act. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions. Subject to the foregoing, transfers of this Subordinated
Note shall be registered upon registration books maintained for such purpose by or on behalf of the Company. Prior to presentation
of this Subordinated Note for registration of transfer, the Company shall treat the registered holder hereof as the owner and holder
of this Subordinated Note for the purpose of receiving all payments of principal and the Premium Payment and for all other purposes
whatsoever, whether or not this Subordinated Note shall be overdue and the Company shall not be affected by notice to the contrary.
Notwithstanding the foregoing, Holder may assign this Subordinated Note to an affiliated entity without the prior written consent
of the Company so long as such assignment complies with applicable law.

 

11. 
Assignment by the Company. Neither this Subordinated Note nor any of the rights, interests or obligations
hereunder may be assigned, in whole or in part (other than by operation of law) by the Company without the prior written consent
of the Majority Holders.

 

12. 
Notices. All notices, requests, demands, consents, instructions or other communications required or permitted
hereunder shall be in writing and faxed, mailed or delivered to each party at the respective addresses of the parties as set forth
on the signature page hereto, or at such other address or facsimile number as a party shall have furnished to the other party in
writing. All such notices and communications will be deemed effectively given the earlier of (i) when received, (ii) when
delivered personally, (iii) one business day after being delivered by facsimile (with receipt of appropriate confirmation),
(iv) one business day after being deposited with an overnight courier service of recognized standing or (v) four days
after being deposited in the U.S. mail, first class with postage prepaid.

 

    	-8-

    	 

    
 

13. 
Employees and Agents. Holder may take any action hereunder by or through agents or employees so long as such
agents or employees are duly authorized to so act on behalf of the Holder.

 

14. 
Payment. Payment shall be made in lawful tender of the United States.

 

15. 
Expenses; Waivers. If this Subordinated Note is not paid when due and Holder takes any action to enforce Holder’s
rights hereunder, the Company shall promptly pay upon demand by Holder all such reasonable costs of collection, including reasonable
attorneys’ fees, whether or not litigation is commenced. The Company hereby waives notice of default, presentment or demand
for payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument. The Company
also shall pay for all attorney’s fees incurred by Holder related to the drafting and preparation of this Subordinated Note.

 

16. 
Governing Law. This Subordinated Note and all actions arising out of or in connection with this Subordinated
Note 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.

 

17. 
Effectiveness. This Subordinated Note shall become effective upon the execution by the Company and Holder.

 

 

[Signatures Appear on
Following Page]

 

    	-9-

    	 

    
 

The Company has caused this Subordinated Note
to be issued as of the date first written above and agrees to all the terms set forth above.

 

 

	 	CNS RESPONSE, INC.	 
	 	 	 	 
	 	 	 	 
	 	By:  	 	 
	 	Name: 	 	 
	 	Title: 	 	 

 

	 	Address: 	85 Enterprise, Suite 410	 
	 	 	Aliso Viejo, CA 92656	 

 

	Accepted and agreed: 	 	 
	 	 	 
	 	 	 
	HOLDER: 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 Name and Position	 	 
	 	 	 
	 	 	 
	Address: 	 	 

  

    	-10-

    	 

    

 

EXHIBIT I

 

CNS RESPONSE, INC.

CONVERSION NOTICE

 

Reference is made to the Subordinated Convertible
Promissory Note (the “Subordinated Note”) issued to the undersigned by CNS Response, Inc. (the “Company”).
In accordance with and pursuant to the Subordinated Note, the undersigned hereby elects to convert the Conversion Amount (as defined
in the Subordinated Note) of the Subordinated Note indicated below into shares of Common Stock par value $0.001 per share (the
“Common Stock”) of the Company, as of the date specified below.

 

	 	Date of Conversion: 	 
	 		 

	 	Aggregate Conversion
        Amount to be converted:  	 

	 	 	 
	 	Please confirm the following
        information: 	 
	 	 	 

	 	Conversion Price: 	 
	 	 	 

	 	Number of shares
        of Common Stock to be issued: 	 
	 	 	 

 

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

	 	Facsimile Number: 	 
	 	 	 

	 	Authorization: 	 
	 	 	 

	 	By: 	 
	 	 	 
	 	Title: 	 
	 	 	 
	 	Dated 	 
	 	 	 

	 	 	 
	 	Account Number: 	 

	 	(if electronic book entry transfer)	 

	 	 	 
	 	Transaction Code
        Number: 	 

	 	(if electronic book entry transfer)

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