Document:

Unassociated Document

    THIS NOTE AND ANY SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION OF THIS 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 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.

    PROMISSORY
NOTE

     

    
      	
              $______________

            	
              August
      20, 2010

            
	 
      	
              Aliso
      Viejo, California

            

    

    

    FOR VALUE
RECEIVED, CNS Response, Inc., a Delaware corporation (the “Company”), promises to pay to
_______________ (“Investor”, or “Noteholder”), or its
registered assigns, in lawful money of the United States of America, the
principal sum of ________________________ ($____________), together with a
single payment of accrued interest calculated based on the actual days
outstanding and a 360 day year at a rate of ___ percent
(__%).  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 Secured Promissory Note (this
“Note”) shall be due and
payable, unless earlier converted in accordance with Section 6 hereof, on the
earliest of (i) the maturity date of December 15, 2010 (“Maturity Date”), (ii) upon
prepayment of this Note pursuant to Section 3 below, (iii) the closing of a
financing in which the aggregate proceeds to the Company are not less than
$3,000,000 (which, for the purposes of clarity, shall include a financing
transaction that involves multiple closings), or (iv) 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.   Repayment
of the outstanding debt under this Note is guaranteed by SAIL Venture Partners,
LP (“Guarantor”) as per
a separate Guaranty executed by the Guarantor.

     

    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)  “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
Noteholder.  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 Note and any Person which shall succeed to
or assume the obligations of the Company under this 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)  “Exchange Act Filings” shall
mean the filings made by the Company with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended, including but not
limited to the Company’s Annual Report on Form 10-K for the year ended September
30, 2009, the Quarterly Reports on Form 10-Q for the periods ended December 31,
2009 and March 31, 2010 and all periodic reports on Form 8-K.

     

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

     

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

     

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

     

    (i)   “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.

     

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

     

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

     

    (l)   “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).

     

    (m) “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).

     

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

     

    3.  Prepayment.  This
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”).  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 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 Note is delivered for cancellation as set forth in the
preceding sentence.

    
      
         

      

      
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    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 the Interest Payment on this Note when
due.

     

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

     

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

     

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

     

    (i)          Declare
the Note and the Interest Payment be immediately due and payable, and upon such
declaration, the 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 Investor and otherwise
available to creditors at law and in equity.

     

    6.  Conversion. The 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.  At any time or times on or after the date hereof, the
Noteholder 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 Noteholder) that may be
payable with respect to the issuance and delivery of shares of Common Stock to
the Noteholder upon conversion of any Conversion Amount.

    
      
         

      

      
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    (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 (x) such Conversion Amount by (y) 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.

     

    “Conversion Price” means, as of
any Conversion Date (as defined below) or other date of determination, $0.50,
subject to adjustment as provided herein.

     

    (c)  Mechanics of
Conversion.

     

    (i)       Optional
Conversion.  To convert any Conversion Amount into shares of
Common Stock on any date (a “Conversion Date”), the
Noteholder 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 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 Noteholder (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 Noteholder or its designee, for the
number of shares of Common Stock to which the Noteholder shall be
entitled.  If the Note is physically surrendered for conversion as
required by Section 6(c)(ii) and the outstanding principal of the 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 Note and at its own expense, issue and
deliver to the Noteholder a new 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 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. Notwithstanding
anything to the contrary set forth herein, upon conversion of any portion of the
Note in accordance with the terms hereof, the Noteholder shall not be required
to physically surrender the Note to the Company unless (A) the full Conversion
Amount represented by the Note is being converted or (B) the Noteholder has
provided the Company with prior written notice (which notice may be included in
a Conversion Notice) requesting physical surrender and reissue of the
Note.  The Noteholder 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 Noteholder and the
Company, so as not to require physical surrender of the Note upon
conversion.

    
      
         

      

      
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    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.

    
      
         

      

      
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    (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
Noteholder under the 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 Noteholder, 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.

     

    (g)  Minimum Adjusted Conversion
Price.  Notwithstanding
anything to the contrary set forth in this Note, the Conversion Price shall not
be less than $0.30.

     

    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.  With respect to any offer, sale or other disposition of
this Note, 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, all in accordance with the terms of the
notice delivered to the Company.  This 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 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 the Premium Payment 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 to an affiliated entity without the prior written consent of the Company so
long as such assignment complies with applicable law.

    
      
         

      

      
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    11. Representations
and Warranties.

     

    (a)          Investor
represents and warrants to the Company that:

     

    (i)         Authorization.  Investor
has full power and authority to enter into this Note.  This Note
constitutes a valid and legally binding obligation of Investor, except as
limited by bankruptcy, insolvency or other laws of general application relating
to or affecting the enforcement of creditors’ rights generally and general
principles of equity.

     

    (ii)        Accredited
Investor.  Investor is an “accredited investor” within the
meaning of Rule 501 of Regulation D promulgated under the Securities
Act.

     

    (iii)       Investor
has had an opportunity to read and review all Exchange Act Filings of the
Company, has had an opportunity to ask questions of management of the Company
and is fully aware of the risks attendant to an investment in the
Note.

     

    (b)      
   The Company represents and warrants to Investor
that:

     

    (i)         Existence of
Company.  The Company is a duly organized Delaware
corporation.  The Company is validly existing in all jurisdictions
where it conducts its business.

     

    (ii)        Authority to
Execute.  The execution, delivery and performance by the
Company of this Note are within the Company’s corporate powers, have been duly
authorized by all necessary corporate action, do not and will not conflict with
any provision of law or organizational document of the Company (including its
Certificate of Incorporation or Bylaws) or of any agreement or contractual
restrictions binding upon or affecting the Company or any of its property
and need no further
stockholder or creditor consent.

     

    (iii)       No Stockholder Approval
Required.  No approval of the Company’s stockholders is
required for the issuance of this Note or the granting of the security interest
hereunder.

     

    (iv)       Binding
Obligation.  This Note is a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
subject, as to enforcement of remedies, to applicable bankruptcy, insolvency,
moratorium, reorganization and similar laws affecting creditors’ rights
generally and to general equitable principles.

     

    (v)        Litigation.  Except
as previously disclosed to Investor and described in the Exchange Act Filings,
no litigation or governmental proceeding is pending or threatened against the
Company which may have a materially adverse effect on the financial
condition,  operations or prospects of the Company, and to the
knowledge of the Company, no basis therefore exists.

     

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

    
      
         

      

      
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    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 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.

     

    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 the 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.

     

    18. Effectiveness.  This
Note shall become effective upon the execution by the Company and
Investor.

     

    [Remainder
of Page Intentionally Left Blank]

    
      
         

      

      
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    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:  George
      Carpenter

                
	 
      	
                  Its:  Chief
      Executive Officer

                
	 
      	 
      
	 
      	
                  Address:  85
      Enterprise, Suite
      410           

                
	 	 
	 
      	
                  Aliso
      Vejo, CA
      92656           

                

        

      

    

     

    Accepted
and agreed:

    

    
      	
              INVESTOR:

            	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      
	
              Name
      and Position

            	 
      
	 
      	 
      
	
              Address:

            	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      

    

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
I

     

    CNS
RESPONSE, INC.

    CONVERSION
NOTICE

     

    Reference
is made to the Convertible Note (the “Note”) issued to the
undersigned by CNS Response, Inc. (the “Company”).  In
accordance with and pursuant to the Note, the undersigned hereby elects to
convert the Conversion Amount (as defined in the Note) of the 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 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)GUARANTY

     

    This
Guaranty (this “Guaranty”) is entered into as of August 20, 2010, by the person
or entity listed on the signature page hereto as the “Guarantor” (the
“Guarantor”), in favor of ____________________ (“Investor”).

     

    Recitals

     

    A.          Concurrently
herewith, CNS Response, Inc. a Delaware corporation (“Borrower”), is issuing to
Investor a Promissory Note dated as of the date hereof (the “Note”), pursuant to
which Investor has agreed to loan to Borrower the aggregate principal amount of
$____________ (the “Loan”), subject to the terms and conditions set forth
therein.

     

    B.           In
consideration of the agreement of Investor to make the Loan to Borrower under
the Note, Guarantor is willing to guaranty the full payment and performance by
Borrower of all of its obligations thereunder, all as further set forth
herein.

     

    C.           Guarantor
will obtain substantial direct and indirect benefit from the Loan made by
Investor to Borrower under the Note.

     

    Now,
Therefore, to induce Investor to enter into the Note and to make the
Loan, and for other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and intending to be legally bound, Guarantor
hereby represents, warrants, covenants and agrees as follows:

     

    Section
1.        Guaranty.

     

    1.1           Unconditional Guaranty of
Payment.  In consideration of the foregoing, Guarantor hereby
irrevocably, absolutely and unconditionally guarantees to Investor the prompt
and complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all principal, interest and other amounts under
the Note (collectively, the “Obligations”).  Guarantor agrees that it
shall execute such other documents or agreements and take such action as
Investor shall reasonably request to effect the purposes of this
Guaranty.

     

    1.2           Separate
Obligations.  These obligations are independent of Borrower’s
obligations and separate actions may be brought against Guarantor (whether
action is brought against Borrower or whether Borrower is joined in the
action).

     

    Section
2.        Representations and
Warranties.

     

    Guarantor
hereby represents and warrants that:

     

    (a)           Guarantor:
(i) if an entity, is duly organized and validly existing under the laws of its
jurisdiction of formation; (ii) if an entity, is duly qualified to do business
in every jurisdiction where the nature of its business requires it to be so
qualified (except where the failure to so qualify would not have a material
adverse effect on Guarantor’s condition, financial or otherwise, or on
Guarantor’s ability to pay or perform its obligations hereunder); and (iii) has
all requisite power and authority to execute and deliver this Guaranty being
entered into and to perform its obligations thereunder and
hereunder.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    (b)           The
execution, delivery and performance by Guarantor of this Guaranty (i) are
within Guarantor’s powers and have been duly authorized by all necessary action
on the part of Guarantor; (ii) do not contravene Guarantor’s charter documents
(if applicable) or any law or any contractual restriction binding on or
affecting Guarantor or by which Guarantor’s property may be affected; (iii) do
not require any authorization or approval or other action by, or any notice to
or filing with, any governmental authority or any other Person under any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which Guarantor is a party or by which Guarantor or any of its property is
bound, except such as have been obtained or made; and (iv) do not result in the
imposition or creation of any lien or encumbrance upon any property of
Guarantor.

     

    (c)           This
Guaranty is a valid and binding obligation of Guarantor, enforceable against
Guarantor in accordance with its terms, except as the enforceability thereof may
be subject to or limited by bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws relating to or affecting the rights of
creditors generally.

     

    (d)           There
is no action, suit or proceeding affecting Guarantor pending or threatened
before any court, arbitrator, or governmental authority, domestic or foreign,
which may have a material adverse effect on the ability of Guarantor to perform
its obligations under this Guaranty.

     

    (e)           Guarantor’s
obligations hereunder are not subject to any offset or defense against Investor
or Borrower of any kind.

     

    (f)           The
incurrence of Guarantor’s obligations under this Guaranty will not cause
Guarantor to (i) become insolvent; (ii) be left with unreasonably small capital
for any business or transaction in which Guarantor is presently engaged or plans
to be engaged; or (iii) be unable to pay its debts as such debts
mature.

     

    Section
3.            General
Waivers.  Guarantor waives:

     

    (a)           Any
right to require Investor to (i) proceed against Borrower or any other person;
(ii) proceed against or exhaust any security, or (iii) pursue any other
remedy.  Investor may exercise or not exercise any right or remedy it
has against Borrower without affecting Guarantor’s liability
hereunder.

     

    (b)           Any
defenses from disability or other defense of Borrower or from the cessation of
Borrower’s liabilities.

     

    (c)           Any
setoff, defense or counterclaim against Investor.

     

    (d)           Any
defense from the absence, impairment or loss of any right of reimbursement or
subrogation or any other rights against Borrower.  Until Borrower’s
obligations to Investor have been paid, Guarantor has no right of subrogation or
reimbursement or other rights against Borrower.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (e)           Any
right to enforce any remedy that Investor has against Borrower.

     

    (f)           The
benefit of any act or omission by Investor which directly or indirectly results
in or aids the discharge of Borrower from any of the Obligations by operation of
law or otherwise.

     

    Section
4.          Reinstatement.  Notwithstanding
any provision of the Note to the contrary, the liability of Guarantor hereunder
shall be reinstated and revived and the rights of Investor shall continue if and
to the extent that for any reason any payment by or on behalf of Guarantor or
Borrower is rescinded or must be otherwise restored by Investor, whether as a
result of any proceedings in bankruptcy or reorganization or otherwise, all as
though such amount had not been paid.  The determination as to whether
any such payment must be rescinded or restored shall be made by Investor in its
sole discretion; provided,
however, that if Investor chooses to contest any such matter at the
request of Guarantor, Guarantor agrees to indemnify and hold harmless Investor
from all costs and expenses (including, without limitation, reasonable
attorneys’ fees) of such litigation.  To the extent any payment is
rescinded or restored, Guarantor’s obligations hereunder shall be revived in
full force and effect without reduction or discharge for that
payment.

     

    Section
5.           Withholding.  In the
event any payments are received by Investor from Guarantor hereunder, such
payments will be made subject to applicable withholding for any taxes, levies,
fees, deductions, withholding, restrictions or conditions of any nature
whatsoever.  Specifically, if at any time any governmental authority,
applicable law or regulation requires Guarantor to make any such withholding or
deduction from any such  payment or other sum payment hereunder to
Investor, Guarantor hereby covenants and agrees that the amount due from
Guarantor with respect to such payment or other sum payable hereunder will be
increased to the extent necessary to ensure that, after the making of such
required withholding or deduction, Investor receives a net sum equal to the sum
which it would have received had no withholding or deduction been required and
Guarantor shall pay the full amount withheld or deducted to the relevant
governmental authority.  Guarantor will, upon request, furnish
Investor with proof satisfactory to Investor indicating that Guarantor has made
such withholding payment, provided, however, that Guarantor need not make any
withholding payment if the amount or validity of such withholding payment is
contested in good faith by appropriate and timely proceedings and as to which
payment in full is bonded or reserved against by Guarantor.  The
agreements and obligations of Guarantor contained in this Section shall survive
the termination of this Guaranty.

     

    Section
6.           No Waiver;
Amendments.  No failure on the part of Investor to exercise, no
delay in exercising and no course of dealing with respect to, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right.  The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.  This
Guaranty may not be amended or modified except by written agreement between
Guarantor and Investor, and no consent or waiver hereunder shall be valid unless
in writing and signed by Investor.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    Section
7.         Compromise and
Settlement.  No compromise, settlement, release, renewal,
extension, indulgence, change in, waiver or modification of any of the
Obligations or the release or discharge of Borrower from the performance of any
of the Obligations shall release or discharge Guarantor from this Guaranty or
the performance of the obligations hereunder.

     

    Section
8.          Notice.  Any notice
or other communication herein required or permitted to be given shall be in
writing and may be delivered in person or sent by facsimile transmission,
overnight courier, or by United States mail, registered or certified, return
receipt requested, postage prepaid and addressed as follows:

     

    
      	
               
      

            	
              If
      to Guarantor:

            	
              SAIL
      Venture Partners

            

    

    
      	
               
      

            	 	
              Attn:
      David B. Jones

            

    

    
      	
               
      

            	 	
              600
      Anton Blvd. Suite 1010

            

    

    
      	
               
      

            	  	
              Costa
      Mesa, CA 92626

            

    

    

    If to
Investor:

    

     

    or at
such other address as may be substituted by notice given as herein
provided.  Every notice, demand, request, consent, approval,
declaration or other communication hereunder shall be deemed to have been duly
given or served on the date on which personally delivered or sent by facsimile
transmission or three (3) business days after the same shall have been deposited
in the United States mail.  If sent by overnight courier service, the
date of delivery shall be deemed to be the next business day after deposited
with such service.

     

    Section
9.         Entire
Agreement.  This Guaranty constitute and contain the entire
agreement of the parties and supersedes any and all prior and contemporaneous
agreements, negotiations, correspondence, understandings and communications
between Guarantor and Investor, whether written or oral, respecting the subject
matter hereof and thereof.

     

    Section
10.       Severability.  If
any provision of this Guaranty is held to be unenforceable under applicable law
for any reason, it shall be adjusted, if possible, rather than voided in order
to achieve the intent of Guarantor and Investor to the extent
possible.  In any event, all other provisions of this Guaranty shall
be deemed valid and enforceable to the full extent possible under applicable
law.

     

    Section
11.       Assignment; Governing Law.  This
Guaranty shall be binding upon and inure to the benefit of Guarantor and
Investor and their respective successors and assigns, except that Guarantor
shall not have the right to assign its rights hereunder or any interest herein
without the prior written consent of Investor, which may be granted or withheld
in Investor’s sole discretion.  Any such purported assignment by
Guarantor without Investor’s written consent shall be void.  This
Guaranty shall be governed by, and construed in accordance with, the laws of the
State of California without regard to principles thereof regarding conflict of
laws.

     

    
      [SIGNATURE
PAGE FOLLOWS]

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the undersigned has executed this Guaranty as of the day and
year first written above.

     

    
      
        
          	 
      	
                  GUARANTOR:

                
	 
      	 
      
	 
      	
                  By:

                	 
      	 
      
	 
      	 
      	
                  Name:

                
	 
      	 
      	
                  Title:

                

        

      

    

     

    
      
         

      

      
        5

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