Document:

Unassociated Document

    Exhibit 10.2

     

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

     

     

    CNS
RESPONSE, INC.

    SECURED
CONVERTIBLE PROMISSORY NOTE

     

    
      
        	
                $___________

              	
                ________
      __, 2009

              
	 
      	
                Costa
      Mesa, California

              

      

    

    
       

      
        FOR VALUE
RECEIVED, CNS Response, Inc., a Delaware corporation (the “Company”), promises to pay to
SAIL Venture Partners, LP (“Investor”), or its assigns, in
lawful money of the United States of America, the principal sum of two
hundred thousand ($200,000), together with interest from the date of this
note (this “Note”) on
the unpaid principal balance at a rate equal to 8.0% per annum, computed on the
basis of the actual number of days elapsed and a year of 365
days.  All unpaid principal, together with any then unpaid and accrued
interest and other amounts payable hereunder, shall be due and payable, unless
converted pursuant to Section 7 below, on the earlier of (i) a declaration
by Investor on or after June 30, 2009 (the “Maturity Date”) that such
amounts are due and payable or (ii) 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.  This Note is secured by a lien
on all of the assets of the Company pursuant to the terms of Section 6
below.  This Note is issued pursuant to the Bridge Note and Warrant
Purchase Agreement, dated May 14, 2009 (the “Agreement”), and all
capitalized terms not defined in this Note shall have the meaning ascribed to
them in the Agreement.

         

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

         

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

         

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

         

        (b)           “Equity Financing Conversion
Price” shall mean 85% of the per share price paid for the securities in
the Qualified Equity Financing.

         

        (c)           “Investor” shall mean the
Person specified in the introductory paragraph of this Note or any Person who is
the registered holder of this Note.

         

        (d)           
“Outstanding Debt” shall
mean, as of a particular time, the then outstanding principal amount of this
Note and all then accrued and unpaid interest thereon.

         

        (e)           “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.

         

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

         

        2.      Interest.  Subject
to Sections 3 and 7, accrued interest on this Note shall be payable on the
earlier of (i) a declaration by Investor on or after the Maturity Date that
the Outstanding Debt is due and payable and (ii) when, upon or after
the occurrence of an Event of Default (as defined below), the Outstanding Debt
is made due and payable in accordance with the terms hereof.

         

        
          
             

          

          
             

            
              

            

          

          
             

          

        

         

        3.      Prepayment.  This
Note may not be prepaid except with the prior written consent of
Investor.  Notwithstanding any other provision of this Note, if prior
to the date on which all of the Outstanding Debt is repaid there is a
liquidation, dissolution or winding-up of the Company (a “Liquidation Event”), then,
unless Investor provides written notice to the Company to the contrary prior to
the closing of the Liquidation Event, concurrently with the closing of the
Liquidation Event, in full satisfaction of the Outstanding Debt, the Company
shall pay Investor an amount equal to the product of (x) 250% multiplied by
(y) the Outstanding Debt.  Investor agrees to deliver the original of
this Note (or a notice to the effect that the original 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 Liquidation Event for
cancellation; provided,
however, that upon payment 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 Note is delivered for cancellation as set
forth in the preceding sentence.

         

        4.      Notice of
Defaults. The Company shall furnish to Investor 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 interest on a Note when due.

         

        (ii)                 Failure
of the Company to perform or observe any covenant or agreement as required by
the Loan Documents.

         

        (iii)                 The
Company makes a general assignment for the benefit of creditors.

         

        (iv)                 Any
proceeding is instituted by or against the Company seeking to adjudicate it
bankrupt or insolvent, and such proceeding is not dismissed within sixty (60)
days.

         

        (v)                 The
entry against the Company of a final judgment, decree or order for the payment
of money in the excess of $25,000 and the continuance of such judgment, decree
or order unsatisfied for a period of thirty (30) days without a stay of
execution.

         

        (vi)                 The
initiation of a proxy fight by a shareholder of the Company against the
management of the Company.

         

        (vii)                 The
initiation of a lawsuit against the Company or any of its shareholders by any
party, including a shareholder of the Company.

         

        (viii)                 George
Carpenter voluntarily or involuntarily terminates his employment with the
Company.

         

        (ix)                 Investor
determines, in its sole discretion, that the Company will not close by June 30,
2009 an equity financing in the Company in an amount and on terms acceptable to
Investor.

         

        (x)                 Any
of the representations and warranties of the Company made in any Loan Document
are not true and correct in any material respect as of the date of such Loan
Document.

         

        
          
             

          

          
             

            
              

            

          

          
             

          

        

         

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

         

        (i)                 Declare
this Note, all interest thereon, and all other obligations under or pursuant to
the Loan Documents to be immediately due and payable, and upon such declaration,
this Note, interest and such other obligations 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 Investor under Section 6
below and otherwise available to creditors at law and in equity.

         

        6.      Security
Agreement.

         

        (a)           Grant of Security
Interest.

         

        (i)                 The
Company, in consideration of the indebtedness described in this Note, hereby
grants and conveys to Investor a security interest in and to all of the
Company’s existing and future right, title and interest in, to and under the
Collateral as defined in Section 6(b) of this Note.

         

        (ii)                 Investor
and Company agree that the indebtedness evidenced by the Note is senior in right
of payment to all presently existing and hereafter arising indebtedness for
borrowed money of the Company, and any other indebtedness of the Company, except
that the indebtedness evidenced by the Note is subordinate and junior in right
of payment to the indebtedness of the Company evidenced by those certain notes,
dated March 30, 2009, issued to Investor and Brandt Ventures, GP.  All
liens and security interests at any time granted by the Company to secure the
Note, including the Collateral, are senior to all presently existing and
hereafter arising liens and security interests in the assets of the Collateral
which secure any and all other indebtedness, except that the liens and security
interests securing the Note are subordinate and junior to the liens and security
interest securing indebtedness of the Company evidenced by those certain notes,
dated March 30, 2009, issued to Investor and Brandt Ventures, GP.  The
Company has taken, and will take, all actions necessary to make the statements
in this Section 6(a)(ii) true.

         

        (b)           Property.  The
property subject to the security interest (the “Collateral”) is as
follows:

         

        (i)                 Equipment and
Fixtures.  All equipment of every type and description owned by
the Company, including (without limitation) all present and future machinery,
furniture, fixtures, manufacturing equipment, shop equipment, office and
recordkeeping equipment, parts, tools, supplies and other goods (except
inventory) used or bought for use by the Company for any business or enterprise
and including all goods that are or may be attached or affixed to or otherwise
become fixtures upon any real property.

         

        (ii)                 Accounts Receivable and
Other Intangibles.  All of the Company’s accounts, chattel
paper, contract rights, commissions, warehouse receipts, bills of lading,
delivery orders, drafts, acceptances, notes, securities and other instruments;
documents; general intangibles, patents and trademarks, applications for patents
and trademarks including, but  not limited to, the patent application
entitled “Method for Classifying and Treating Physiologic Brain Imbalances Using
Quantitative EEG,” know-how, proprietary information, all software source and
object code whether created or licensed by the Company, all copyrights, any
other intellectual property, all data that comprises the QEEG patient database,
all forms of receivables, and all guaranties and securities therefore; all
right, title and interest in and to the TRD study and its contents, results and
documentation; all right, title and interest in and to any and all past, present
and future studies and their contents, results and documentations.

         

        
          
             

          

          
             

            
              

            

          

          
             

          

        

         

        (iii)                 Inventory and Other Tangible
Personal Property.  All of the Company’s inventory, including
all goods, merchandise, materials, raw materials, work in progress, finished
goods, now owned or hereinafter acquired and held for sale or lease or furnished
or to be furnished under contracts or service agreements or to be used or
consumed in the Company’s business and all other tangible personal property of
the Company.

         

        (iv)                 After-Acquired
Property.  All property of the types described in Sections
6(b)(i)-(iii), or similar thereto, that at any time hereafter may be acquired by
Company including, but not limited to, all accessions, parts, additions and
replacements.

         

        (v)                 Products and
Proceeds.  All products and proceeds of the Collateral from the
sale or other disposition of any of the Collateral described or referred to in
6(b)(i)-(iv), including (without limitation) all accounts, instruments, chattel
paper or other rights to payment, money, insurance proceeds and all refunds of
insurance premiums due or to become due under all insurance policies covering
the forgoing property.

         

        (c)           Removal of Collateral
Prohibited.  The Company shall not permanently remove the
Collateral from its premises without the written consent of Investor, except
that the Company may dispose of Collateral in the ordinary course of
business.

         

        (d)           Protection of Security
Interest.  If an Event of Default has occurred and is
continuing, or if any action or proceeding is commenced which materially
adversely affects the Collateral or title hereto or the senior right of payment
or other interest of Investor, then Investor may make such appearance, disburse
such sums and take such action as they deem necessary to protect their interest,
including but not limited to: (a) disbursement of reasonable attorney’s fees;
(b) entry upon the Company’s property to make repairs to the Collateral; and (c)
procurement of satisfactory insurance that is reasonable under the
circumstances; provided, however, Investor may undertake the foregoing only if
it has first provided written notice of the Event of Default to the Company, and
the Company has failed to cure such Event of Default within ten (10) days of
receipt of such notice.  Any amounts disbursed by Investor pursuant to
this Section 6(d), with interest thereon, shall become additional indebtedness
of the Company secured by this Section 6.  Unless the Company and
Investor agree to other terms of payment, such amounts shall be immediately due
and payable, and if Investor notifies the Company within five (5) days of such
disbursement, all such amounts shall bear interest from the date which is ten
(10) days following the date of disbursement at the rate stated in the
Note.

         

        (e)           Forbearance by Investor Not a
Waiver.  Any forbearance by Investor in exercising any right or
remedy hereunder, or otherwise afforded by applicable law, shall not by a waiver
of or preclude the exercise of, any right or remedy.  The acceptance
by Investor of payment of any sum secured by this Note after the due date of
such payment shall not be a waiver of the right of either Investor to either
require prompt payment when due of all other sums so secured or to declare a
default for failure to make prompt payment.  No action taken by
Investor shall waive the right of either Investor to accelerate the indebtedness
secured by this Section 6 and seek such other remedies as are provided by the
Note and/or applicable law.

         

        (f)           Uniform Commercial Code Security
Agreement.  This Section 6 is intended to be a security
agreement pursuant to the Uniform Commercial Code for any of the items specified
above as part of the Collateral which, under applicable law, may be subject to a
security interest pursuant to the Uniform Commercial Code of Delaware,
California or any applicable jurisdiction where the Collateral may be located
(the “UCC”), and the
Company hereby grants Investor a security interest in said items.  The
Company agrees that Investor may file any appropriate document in the
appropriate jurisdiction as a financing statement for any of the
Collateral.  In addition, the Company agrees to execute and deliver to
Investor, upon its request, any financing statements, as well as extensions,
renewals and amendments thereof, and reproductions of this Note in such form as
Investor may require to perfect a security interest with respect to the
Collateral.  The Company shall pay all costs of filing such financing
statements and any extensions, renewal, amendments and releases thereof, and
shall pay all reasonable costs and expenses of any record searches for financing
statements Investor may reasonably require.  Upon the occurrence and
during the continuance of an Event of Default, Investor shall have the remedies
of a secured party under the UCC and may exercise all rights and remedies
available under the UCC and this Note.

        
          
             

          

          
             

            
              

            

          

          
             

          

        

         

        (g)           Rights of
Investor.

         

        (i)                 Upon
the occurrence of an Event of Default, Investor may require the Company to
assemble the Collateral and make it available to Investor at the place to be
designated by Investor which is reasonable convenient to both
parties.  Investor may sell all or any part of the Collateral as a
whole or in parcels either by public auction, private sale, or other method of
disposition pursuant to UCC.  Investor may bid at any public sale on
all or any portion of the public sale or of the Collateral.  Investor
shall give the Company reasonable notice of the time and place of any public
sale or of the time after which any private sale or other disposition of the
Collateral is to be made, and notice given at least ten (10) days before the
time of the sale or other disposition shall be conclusively presumed to be
reasonable.

         

        (ii)                 Notwithstanding
any provision of this Note, Investor shall be under no obligation to offer to
sell the Collateral.  In the event Investor offers to sell the
Collateral, Investor will be under no obligation to consummate a sale of the
Collateral if, in their reasonable business judgment, none of the offers
received by him reasonably approximates the fair value of the
Collateral.

         

        (iii)                 In
the event Investor elects not to sell the Collateral, Investor may elect to
follow the procedures set forth in the UCC for retaining the Collateral in
satisfaction of the Company’s obligation, subject to the Company’s rights under
such procedures.  To the extent allowable by the UCC, the Company
agrees to allow Investor to take possession and ownership of all right, title
and interest in and to the TRD study and its contents, results and documentation
without judicial process upon the occurrence of an Event of
Default.  The Company further acknowledges and agrees, after
consultation with its advisors, that in the event the Company becomes a debtor
in any bankruptcy or other insolvency proceeding, whether voluntarily or
involuntarily, in consideration of the significant value and benefits being
conferred on the Company pursuant to the terms of this Note, any automatic stay
that may otherwise apply to Investor in the context of such proceeding is hereby
voluntarily waived as to Investor to the extent necessary to allow Investor to
exercise its rights to foreclose or otherwise take possession and ownership of
all right, title and interest in and to the TRD study and its contents, results
and documentation.

         

        (h)           Remedies
Cumulative.  Each remedy provided in this Note is distinct and
cumulative to all other rights or remedies under this Note or afforded by law or
equity, and may be exercised concurrently, independently, or successively, in
any order whatsoever.

         

        7.      Conversion.

         

        (a)           Automatic
Conversion.  In the event that the Company consummates, while
the Outstanding Debt is outstanding, an equity financing of not less than
$1,500,000, excluding any and all notes and other liabilities or indebtedness
which are converted, and with the principal purpose of raising capital (a “Qualified Equity Financing”),
then the Outstanding Debt shall automatically convert into the number of
securities issued as part of the Qualified Equity Financing equal to the
quotient of (x) the Outstanding Debt divided by (y) the Equity Financing
Conversion Price.  The securities shall otherwise be issued on the
same terms as such shares are issued to the lead investor that purchases the
securities in the Qualified Equity Financing.  Upon such conversion,
Investor hereby agrees to execute and deliver to the Company all transaction
documents related to the Qualified Equity Financing, including a purchase
agreement and other ancillary agreements having substantially the same terms
(other than price) as those agreements entered into by the other purchasers of
the securities, subject to Investor’s reasonable review and
approval.  Investor also agrees to deliver the original of this Note
(or a notice to the effect that the original 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 Qualified Equity Financing for cancellation;
provided, however, that
upon satisfaction of the conditions set forth in this Section 7(a), the
Outstanding Debt shall be deemed converted and the Company shall have no other
obligation to repay the Outstanding Debt, whether or not this Note is delivered
for cancellation as set forth in this sentence.

         

        
          
             

          

          
             

            
              

            

          

          
             

          

        

         

        (b)           Optional
Conversion.  In the event that the Company issues preferred
stock that is not part of a Qualified Equity Financing, Investor may, at its
sole option, convert the Outstanding Debt into the number of shares of such
preferred stock equal to the quotient of (x) the Outstanding Debt divided by (y)
85% of the lowest per share price for which such preferred stock was issued (the
“Optional Conversion
Price”).  Investor may exercise this optional conversion right
by sending notice to the Company any time after the issuance of the preferred
stock for so long as the Outstanding Debt is outstanding.  The
preferred stock shall otherwise be issued on the same terms as such shares are
issued to the largest purchaser of such shares.  Upon such conversion,
Investor hereby agrees to execute and deliver to the Company all transaction
documents related to the purchase of the preferred stock, including a purchase
agreement and other ancillary agreements, if applicable, having substantially
the same terms (other than price) as those agreements entered into by the other
purchasers of the preferred stock, subject to Investor’s reasonable review and
approval.  Investor also agrees to deliver the original of this Note
(or a notice to the effect that the original 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  for cancellation; provided, however, that upon
satisfaction of the conditions set forth in this Section 7(b), the
Outstanding Debt shall be deemed converted and the Company shall have no other
obligation to repay the Outstanding Debt, whether or not this Note is delivered
for cancellation as set forth in this sentence.

         

        (c)           Fractional Shares; Interest; Effect
of Conversion.  No fractional shares shall be issued upon
conversion of the Outstanding Debt.  In lieu of the Company issuing
any fractional shares to Investor upon the conversion of the Outstanding Debt,
the Company shall pay to Investor an amount equal to the product obtained by
multiplying the Equity Financing Conversion Price or Optional Conversion Price,
as applicable, by the fraction of a share not issued pursuant to the previous
sentence.

         

        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 Investor
shall be binding upon and benefit the successors, assigns, heirs, administrators
and transferees of the parties.

         

        9.      Waiver and
Amendment.  Any provision of this Note may be amended, waived
or modified upon the written consent of the Company and Investor. Any such
amendment, waiver or modification effected in accordance with this
paragraph shall be binding upon the Company and Investor.

         

        10.           Transfer of this
Note or Securities Issuable on Conversion Hereof.  With respect
to any offer, sale or other disposition of this Note or securities into which
such Note may be converted, Investor will give written notice to the Company
prior thereto, describing briefly the manner thereof, together with a written
opinion of Investor’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 Investor that Investor may
sell or otherwise dispose of this Note or such securities, all in accordance
with the terms of the notice delivered to the Company.  Each Note thus
transferred and each certificate representing the securities 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 Note shall be registered upon registration books
maintained for such purpose by or on behalf of the Company.  Prior to
presentation of this Note for registration of transfer, the Company shall treat
the registered holder hereof as the owner and holder of this Note for the
purpose of receiving all payments of principal and interest hereon and for all
other purposes whatsoever, whether or not this Note shall be overdue and the
Company shall not be affected by notice to the
contrary.  Notwithstanding the foregoing, Investor may assign this
Note or securities into which such Note may be converted to an affiliated entity
without the prior written consent of the Company so long as such assignment
complies with applicable law.

         

        
          
             

          

          
             

            
              

            

          

          
             

          

        

         

        11.           Representations
and Warranties.

         

        (a)           Investor
represents and warrants to the Company that the representations and warranties
made by the Investor in Section 3 of the Agreement are true, correct and
complete as of the date hereof.

         

        (b)           The
Company represents and warrants to Investor that the representations and
warranties made by the Company in Section 2 of the Agreement are true, correct
and complete as of the date hereof.

         

        12.           Assignment by the
Company.  Neither this 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
Investor.

         

        13.           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 to the Agreement, 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.

         

        14.           Employees and
Agents.  Investor 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 Investor.

         

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

         

        16.           Expenses;
Waivers.  If this Note is not paid when due and Investor takes
any action to enforce Investor’s rights hereunder, the Company shall promptly
pay upon demand by Investor 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 Investor related to the drafting
and preparation of this Note.

         

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

         

        [Remainder
of Page Intentionally Left Blank]

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        The Company has caused this 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:

                      	
                         

                      

              

            

          

        

         

        

          

            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          	Accepted
      and agreed:	 
	 	 
	INVESTOR:
      SAIL VENTURE PARTNERS, LP	 
	 	 	 
	 
      	 
      	 
	By:	 
      	 
	Name:	 
      	 
	Title:	
                                                   

                                                	 

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

           

        

        Address:     
600 Anton Blvd., Suite 1010

        Costa Mesa, CA 92626Unassociated Document

     

    
      Exhibit 10.3

       

      THIS
WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933, AS AMENDED OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED.

       

      Void
after

       

      May 31,
2016

       

      _____________________________

       

      WARRANT TO PURCHASE
SHARES

       

      This
Warrant is issued to SAIL Venture
Partners, LP (“Investor”) by CNS Response,
Inc., a Delaware corporation (the “Company”), pursuant to the
terms of that certain Bridge Note and Warrant Purchase Agreement (the “Agreement”), dated May 14,
2009.  All capitalized terms not defined in this Warrant shall have
the meaning ascribed to them in the Agreement.

       

      1.    Purchase of
Shares.  Subject to the terms and conditions hereinafter set
forth and set forth in the Agreement, the holder of this Warrant is entitled,
upon surrender of this Warrant at the principal office of the Company (or at
such other place as the Company shall notify the holder hereof in writing), to
purchase from the Company up to 100,000
fully paid and nonassessable Shares (as defined below) at the Exercise Price (as
defined below).

       

      2.    Definitions.

       

      (a)    Exercise
Price.  The exercise price for the Shares initially shall be
$0.25 per share (such price, as adjusted from time to time, is herein referred
to as the “Exercise
Price”).

       

      (b)    Exercise
Period.  This Warrant shall be exercisable, in whole or in
part, during the term commencing on the date hereof and ending on the expiration
of this Warrant pursuant to Section 14 hereof.

       

      (c)    The
Shares.  The term “Shares” shall mean shares of
the Company’s common stock, par value $0.001 per share.

       

      (d)    Change of
Control.  The term “Change of Control” shall mean
(i) any consolidation or merger involving the Company pursuant to which the
Company's stockholders own less than fifty percent (50%) of the voting
securities of the surviving entity or (ii) the sale of all or substantially all
of the assets of the Company.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      3.    Method of
Exercise.  While this Warrant remains outstanding and
exercisable in accordance with Section 2 above, the holder may exercise, in
whole or in part, the purchase rights evidenced hereby.  Such exercise
shall be effected by:

       

      (i)    the
surrender of the Warrant, together with a notice of exercise to the Secretary of
the Company at its principal offices; and

       

      (ii)    the
payment to the Company of an amount equal to the aggregate Exercise Price for
the number of Shares being purchased.

       

      4.    Net
Exercise.  In lieu of cash exercising this Warrant, the holder
of this Warrant may elect to receive shares equal to the value of this Warrant
(or the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with notice of such election, in which
event the Company shall issue to the holder hereof a number of Shares computed
using the following formula:

       

      Y (A -
B)

      X
=                  A

       

      Where

       

      
        	
                 
      

              	
                X
      --

              	
                The
      number of Shares to be issued to the holder of this
    Warrant.

              

      

       

      
        	
                 
      

              	
                Y
      --

              	
                The
      number of Shares purchasable under this
Warrant.

              

      

       

      
        	
                 
      

              	
                A
      --

              	
                The
      fair market value of one Share.

              

      

       

      
        	
                 
      

              	
                B
      --

              	
                The
      Exercise Price (as adjusted to the date of such
    calculations).

              

      

       

      For
purposes of this Section 4, the fair market value of a Share shall mean the
average of the closing bid and asked prices of Shares quoted in the
over-the-counter market in which the Shares are traded or the closing price
quoted on any exchange on which the Shares are listed, whichever is applicable,
as published in the Western Edition of The Wall Street
Journal for the ten (10) trading days prior to the date of determination
of fair market value (or such shorter period of time during which such stock was
traded over-the-counter or on such exchange).  If the Shares are not
traded on the over-the-counter market or on an exchange, the fair market value
shall be the price per Share that the Company could obtain from a willing buyer
for Shares sold by the Company from authorized but unissued Shares, as such
prices shall be determined in good faith by the Company’s Board of
Directors.

       

      5.    Certificates for
Shares.  Upon the exercise of the purchase rights evidenced by
this Warrant, one or more certificates for the number of Shares so purchased
shall be issued as soon as practicable thereafter, and in any event within
thirty (30) days of the delivery of the subscription notice.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      6.    Issuance of
Shares.  The Company covenants that the Shares, when issued
pursuant to the exercise of this Warrant, will be duly and validly issued, fully
paid and nonassessable and free from all taxes, liens, and charges with respect
to the issuance thereof.

       

      7.    Adjustment of Exercise Price
and Number of Shares.  The number of and kind of securities
purchasable upon exercise of this Warrant and the Exercise Price shall be
subject to adjustment from time to time as follows:

       

      (a)    Subdivisions, Combinations
and Other Issuances.  If the Company shall at any time prior to
the expiration of this Warrant subdivide the Shares, by split-up or otherwise,
or combine its Shares, or issue additional shares of its Shares as a dividend,
the number of Shares issuable on the exercise of this Warrant shall forthwith be
proportionately increased in the case of a subdivision or stock dividend, or
proportionately decreased in the case of a combination.  Appropriate
adjustments shall also be made to the purchase price payable per share, but the
aggregate purchase price payable for the total number of Shares purchasable
under this Warrant (as adjusted) shall remain the same.  Any
adjustment under this Section 7(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend.

       

      (b)    Reclassification,
Reorganization and Consolidation.  In case of any
reclassification, capital reorganization, or change in the capital stock of the
Company (other than as a result of a subdivision, combination, or stock dividend
provided for in Section 7(a) above), then the Company shall make
appropriate provision so that the holder of this Warrant shall have the right at
any time prior to the expiration of this Warrant to purchase, at a total price
equal to that payable upon the exercise of this Warrant, the kind and amount of
shares of stock and other securities and property receivable in connection with
such reclassification, reorganization, or change by a holder of the same number
of Shares as were purchasable by the holder of this Warrant immediately prior to
such reclassification, reorganization, or change.  In any such case
appropriate provisions shall be made with respect to the rights and interest of
the holder of this Warrant so that the provisions hereof, including Sections
7(a), shall thereafter be applicable with respect to any shares of stock or
other securities and property deliverable upon exercise hereof, and appropriate
adjustments shall be made to the purchase price per share payable hereunder,
provided the aggregate purchase price shall remain the same.

       

      (c)    Notice of
Adjustment.  When any adjustment is required to be made in the
number or kind of shares purchasable upon exercise of the Warrant, or in the
Exercise Price, the Company shall promptly notify the holder of such event and
of the number of Shares or other securities or property thereafter purchasable
upon exercise of this Warrant.

       

      8.    No Fractional Shares or
Scrip.  No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant, but in lieu of such
fractional shares the Company shall make a cash payment therefor on the basis of
the Exercise Price then in effect.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      9.    Representations of the
Company.  The Company represents and warrants to Holder that
the representations and warranties made by the Company in Section 2 of the
Agreement are true, correct and complete as of the date hereof. In addition, the
Company represents that the Shares necessary for a cash exercise of this Warrant
are duly reserved.

       

      10.   Representations and
Warranties by the Holder.  The Holder represents and warrants
to the Company that the representations and warranties made by the Holder in
Section 3 of the Agreement are true, correct and complete as of the date
hereof.

       

      11.   Restrictive
Legend.

       

      The Shares (unless registered under the
Securities Act of 1933, as amended (the "Act")) shall
be stamped or imprinted with a legend in substantially the following
form:

       

      THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF, AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.  SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.  COPIES OF THE AGREEMENT COVERING THE PURCHASE
OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
COMPANY.

       

      THE SALE
OF 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 THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105
OF THE CALIFORNIA CORPORATIONS CODE.  THE RIGHTS OF ALL PARTIES TO
THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED
UNLESS THE SALE IS SO EXEMPT.

       

      12.   Warrants
Transferable.  Subject to compliance with the terms and
conditions of this Section 12, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes), upon surrender of this Warrant properly endorsed or
accompanied by written instructions of transfer.  With respect to any
offer, sale or other disposition of this Warrant or any Shares acquired pursuant
to the exercise of this Warrant prior to registration of such Warrant or Shares,
the holder hereof agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of such
holder's counsel, or other evidence, if requested by the Company, to the effect
that such offer, sale or other disposition may be effected without registration
or qualification (under the Act as then in effect or any federal or state
securities law then in effect) of this Warrant or the Shares and indicating
whether or not under the Act certificates for this Warrant or the Shares to be
sold or otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to ensure compliance with such
law.  Upon receiving such written notice and reasonably satisfactory
opinion or other evidence, if so requested, the Company, as promptly as
practicable, shall notify such holder that such holder may sell or otherwise
dispose of this Warrant or such Shares, all in accordance with the terms of the
notice delivered to the Company.  If a determination has been made
pursuant to this Section 12 that the opinion of counsel for the holder or other
evidence is not reasonably satisfactory to the Company, the Company shall so
notify the holder promptly with details thereof after such determination has
been made.  Each certificate representing this Warrant or the Shares
transferred in accordance with this Section 12 shall bear a legend as to the
applicable restrictions on transferability in order to ensure compliance with
such laws, unless in the aforesaid opinion of counsel for the holder, such
legend is not required in order to ensure compliance with such
laws.  The Company may issue stop transfer instructions to its
transfer agent in connection with such
restrictions.   Notwithstanding the foregoing, Holder may assign
this Warrant or the Shares into which such Warrant may be converted to an
affiliated entity without the prior written consent of the Company so long as
such assignment complies with applicable law.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      13.   Rights of
Stockholders.  No holder of this Warrant shall be entitled, as
a Warrant holder, to vote or receive dividends or be deemed the holder of the
Shares or any other securities of the Company which may at any time be issuable
on the exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value, consolidation, merger, conveyance, or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until the
Warrant shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein.

       

      14.   Expiration of Warrant;
Notice of Certain Events Terminating This Warrant.

       

      (a)    This
Warrant shall expire and shall no longer be exercisable upon the earlier to
occur of:

       

      (i)    5:00 p.m.,
California local time, on May 31, 2016; or

       

      (ii)   The
consummation of any Change of Control if the notice set forth in Section 14(b)
is sent.

       

      (b)    The
Company shall provide at least ten (10) days prior written notice of the event
set forth in Section 14(a)(ii), which shall indicate that this Warrant shall
expire upon the consummation of such event.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      15.   Notices.  All
notices and other communications given or made hereunder shall be in writing and
shall be deemed effectively given: (a) upon personal delivery to the party to be
notified, (b) when sent by confirmed electronic mail or facsimile if sent during
normal business hours of the recipient, and if not so confirmed, then on the
next business day, with a copy to be sent by United States first class mail,
postage prepaid, (c) five (5) days after being sent by registered or certified
mail, return receipt required, postage prepaid, or (d) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt.  All communications shall be
sent to the respective parties at their address or fax number as set forth on
the signature page to the Agreement or to such electronic mail address,
facsimile number or address as subsequently modified by written notice given in
according with this Section 15.

       

      16.   Governing
Law.  This Warrant and all actions arising out of or in
connection with this Agreement 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.   Rights and Obligations
Survive Exercise of Warrant.  Unless otherwise provided herein,
the rights and obligations of the Company, of the holder of this Warrant and of
the holder of the Shares issued upon exercise of this Warrant, shall survive the
exercise of this Warrant.

       

      Issued
this ___ day of ______________, 2009.

       

      

      
        
          	 
      	
                  CNS
      RESPONSE, INC.

                
	 	 
	 	                          
	 
      	 
      
	 
      	
                  By:
                              

                
	 	 
	 
      	
                  Title:
                              

                

        

      

                                     

       

      Accepted
and agreed:

      

      SAIL
VENTURE PARTNERS, LP

       

      By:                                                                    

       

      Name:                                                                    

       

      Title:                                                                    

       

      
        	
                Address: 

              	
                600
      Anton Blvd., Suite 1010

              

      

      
        	
                 

              	
                Costa
      Mesa, CA 92626

              

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      EXHIBIT A

       

      NOTICE OF
EXERCISE

      

      
        	
                TO:

              	
                CNS
      Response, Inc.

              

      

      
        	
                 
      

              	                     

      

      
        	
                 
      

              	                     

      

      Attention:
Chief Executive Officer

       

      1.           The
undersigned hereby elects to purchase __________ Shares of _____________
pursuant to the terms of the attached Warrant.

       

      2.           Method
of Exercise (Please initial the applicable blank):

       

      
        	
                 
      

              	
                ___

              	
                The
      undersigned elects to exercise the attached Warrant by means of a cash
      payment, and tenders herewith payment in full for the purchase price of
      the shares being purchased, together with all applicable transfer taxes,
      if any.

              

      

       

      
        	
                 
      

              	
                ___

              	
                The
      undersigned elects to exercise the attached Warrant by means of the net
      exercise provisions of Section 4 of the
  Warrant.

              

      

       

      3.           Please
issue a certificate or certificates representing said Shares in the name of the
undersigned or in such other name as is specified below:

       

      _________________________________

      (Name)

       

      _________________________________

       

      _________________________________

      (Address)

       

      4.           The
undersigned hereby represents and warrants that the aforesaid Shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale, in connection with the distribution thereof, and that the
undersigned has no present intention of distributing or reselling such shares
and all representations and warranties of the undersigned set forth in
Section 10 of the attached Warrant are true and correct as of the date
hereof.

       

      
        
          	 
      	
                  ______________________________

                
	 
      	
                  (Signature)

                
	 	 
	 
      	
                  ______________________________

                
	 
      	
                  (Name)

                
	 	 
	
                  ______________________________

                	
                  ______________________________

                
	
                  (Date)

                	
                   (Title)

                

        

      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      FORM
OF TRANSFER

      (To be
signed only upon transfer of Warrant)

       

      FOR VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto
_______________________________________________ the right represented by the
attached Warrant to purchase ____________ shares
of  ________________________ of CNS Response, Inc. to which the
attached Warrant relates, and appoints ______________ Attorney to transfer such
right on the books of __________, with full power of substitution in the
premises.

       

      

       

      
        	
                Dated:
      ____________________

              

      

       

      

       

      
        
          	 
      
	 
      	
                  (Signature
      must conform in all respects to name of Holder as specified on the face of
      the Warrant)

                
	 	 
	 
      	Address: 	
                                                   

                
	 
      	 	 
      
	 
      	 	                                  
	 
      	 	 
      
	 	 	                                 

        

      

      

       

      Signed in
the presence of:

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